Monday did not promise such a sharp price action as the trading volume was quite low in Asia, while New Zealand traders were off for Queen’s Birthday Holiday, and the economic calendar was almost empty. The volatility came back to the markets during the European trading session as macroeconomic reports could have influenced ECB interest rates decision. Spanish, Italian and French manufacturing PMI kept declining in April, showing that the economic growth is under a threat of a slowdown. Eurozone headline report came in line with the market’s expectations, and EUR/USD edged a bit higher in Europe but accelerated in the U.S. session as rumours about the Fed’s announcement spread among traders, and they were buying call options for the pair. U.S. Manufacturing PMI added fuel to the fire as the index came in much weaker than it was widely anticipated. Construction spending fell, while the industrial production declined, forcing investors to shift the attention to put options for the greenback.
Capital Spending and Monetary Based jumped in Japan in April, confirming that things aren’t that bad in the third largest world's economy as many analysts thought before. However, the USD/JPY currency pair stayed in a tight sideways range as safe-haven flows decreased, while equities jumped, supporting the risk-on sentiment. In contrast, USD/CHF was falling throughout the day as currency speculators were pricing in a potential rate hike by the Swiss National Bank this week. Australian Retail Sales disappointed investors, and AUD/USD was struggling to follow other majors as the Reserve Bank of Australian stayed pat on the interest rates, publishing a dovish economic sentiment and promising more rate cuts this year. British construction PMI declined in April, but traders were discussing events happening on the other side of the Atlantic and Sterling’s losses were limited. European CPI failed to meet the economists’ predictions, falling for a second consecutive month. That news added pressure on the single European currency. Fed Chair Powell spoke later in the U.S., stating that a softer monetary policy would be supportive for the U.S. and global economy. That was an unexpected change in the regulator’s rhetoric as Powell was opposing the political pressure to cut the interest rates before last Wednesday. The greenback plunged, but equities soared as binary options traders were massively purchasing call options for S&P 500 and other major benchmarks.
Australian GDP slowed down in the first quarter as the headline figure was revised down to 0.4% from 0.5%. That was the main reason why AUD/USD failed to perform the same bullish action as NZD/USD this past week. USD/CAD was vulnerable to the selling pressure as Canadian data was stronger-than-expected. Talks about BoC to hike the interest rates renewed in the binary options market and speculators were focusing on put options for the pair. German, French and Eurozone Services PMI improved in May, and call options for Euro cross-rates were in demand. ECB had also supported the currency as no change in the financial conditions was announced. U.S. ADP agency published its version of the Non-Farm employment change, and the headline figure was ugly (27K compared to 180K predicted). As a result, traders continued buying put options for the U.S. dollar versus major currencies and put options versus the Chinese yuan. Crude Oil inventories were not in favour for the price of WTI Crude, which tested the local bottom below $52.00 per barrel but retraced back above $54.00 resistance at the end of the trading week.
Friday became a real nightmare for the dollar bulls as U.S. NFP confirmed the worst-case-scenario for the leading labour market across the globe. The economy added only 75 thousand new jobs in May, while pundits were forecasting +180K. The previous month’s reading was revised down to 224K from 263K, which confirmed that the recent achievements were overestimated. The Federal Reserve officials received another justification to soften the financial conditions, and speculators started pricing in lower interest rates differentials compared to other regions. Put options for the greenback were bought with a heavy volume, and DXY accelerated losses on Friday, promising another volatile week during the summer vacation season.